Hemi link hi lo en ve chhin rawh le.
How does the currency market operate?
Like any other commodity, the exchange rate or price of a currency is determined by the laws of demand and supply. A stronger demand for the currency will push up its price and vice-versa.
What’s an exchange rate?
The exchange rate gives price at which currencies of different countries are bought and sold. An exchange rate of Rs. 50 to a dollar simply means that the value of one US dollar is equivalent to Rs. 50.
Why is the rupee falling?
Foreign institutional investors (FIIs) are cashing out and diving into safer investment bets such as US government bonds due to policy uncertainties such as General Anti-Avoidance Rule (GAAR). This is making dollars scarce and reducing demand for rupees. The spurt in crude oil prices has also pushed up demand for dollars for the import of crude oil.
Should I be worried?
You better be, if you have plans to study and travel abroad. A weaker rupee implies you end up paying more to buy dollars to pay for your fees. If earlier you were planning to pay Rs. 600,000 (at 50 to a dollar) for a $12,000 course in an overseas university, now the cost will go up to Rs. 648,000 (at 54 to a dollar) even though the fee in dollar terms remains unchanged. So, your study loans might go up.
Will it affect Indian companies?
The slide in the rupee will hurt profitability of many companies. Companies that borrowed dollars from overseas banks will be the worst hit as repaying loans will become costlier.